NATIONAL POWER G.R. No.

159457
CORPORATION,
Petitioner, Present:

Panganiban, CJ ,
Chairman,
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, J J
PHILIPPINE ELECTRIC
PLANT OWNERS ASSOCIATION Promulgated:
(PEPOA), INC.,
Respondent. April 7, 2006
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x

DECISION


PANGANIBAN, CJ :


he supply of electricity is a public service that affects national security, economic growth and public
interest. To achieve coherent and effective policy formulation, coordination, implementation and
monitoring within the energy sector, it became necessary to entrust in one body the regulatory
functions covering the energy sector. Thus, the Energy Regulatory Board
[1]
(ERB) was created. The
ERB was given the power to determine, fix and prescribe the rates -- including penalty charges -- of all
energy providers, including the National Power Corporation (NPC).


The Case

Before us is a Petition for Review
[2]
under Rule 45 of the Rules of Court, assailing the March 3,
2003 Decision
[3]
and August 12, 2003 Resolution
[4]
of the Court of Appeals (CA) in CA-GR SP No.
50782. The challenged Decision disposed as follows:

WHEREFORE, the instant petition is DENIED and is
accordingly DISMISSED for lack of merit.
[5]


T

The assailed Resolution denied reconsideration.

The Facts

The NPC is a government-owned and -controlled corporation, existing by virtue of
Commonwealth Act No. 120 and Republic Act No. 6395. Philippine Electric Plant Owners Association
(PEPOA), Inc., is a non-stock corporation composed of private electric plant operators.
[6]
Some members
of PEPOA purchase electric power from petitioner to service power requirements in their respective
franchise areas.
[7]

On December 15, 1995, PEPOA filed before the ERB a Complaint
[8]
against the NPC for alleged
unauthorized collection of rates in the guise of penalty for 1) excess consumption, double or triple the
existing rates; or 2) unused consumption, as if fully availed of.
[9]
The penalties were being charged
pursuant to the NPCs Rules on the Sale of Electricity, specifically Nos. 5 (Minimum Charges) and 6
(Penalty for Consumption in Excess of the Allowable Limit of the Contract Demand/Energy) of the
Schedule of Charges.
[10]
The provisions read:

5. MINIMUM CHARGES

Whenever Customers registered demand/ energy falls below the
Contract Demand and/or Contract Energy, the difference shall be billed at
applicable demand and/or Energy rates as if the Contract Demand and/or Energy
[have] been fully availed of. Provided, that during Customers yearly
maintenance of its facilities not to exceed two (2) billing periods in a year, the
basis of the minimum charge on energy shall be reduced to only fifty percent
(50%) of the Contract Energy; provided further, that thirty (30) days advance
written notice is given to Corporation, and that actual maintenance is subject to
confirmation of Corporation.

6. PENALTY FOR CONSUMPTION IN EXCESS OF THE ALLOWABLE LIMIT OF
THE CONTRACT DEMAND/ ENERGY

Customers consumption in excess of the maximum limits set forth in the
Service Specifications x x x in the Contract, shall be penalized by billing the
excess demand and/or energy at a Rate Equal to Twice the unit price of the
highest priced block in the rate schedule.
[11]


On December 20, 1995, the ERB issued an Order
[12]
directing the NPC to cease and desist from
collecting the penalties, pending resolution of the case. On May 12, 1998, the ERB rendered its Decision,
the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, the Board hereby directs respondent
NPC to refund or correspondingly credit to the complainants (affected electric distribution
utilities) the total amount of P28,870,497.08 corresponding to the said charges as
penalties for excess consumption over the maximum allowable demand energy and
consumption below the contracted demand/energy, computed as follows:

A. Penalties Billed and Collected for Excess Consumption from:

1. Angeles Electric Corp. (AEC) P 2,184,952.80
2. Visayan Electric Co., Inc. (VECO) P23,471,542.00
3. Cagayan Electric Power and Light
Co. (CEPALCO) P 590,515.20
B. Penalty Billed and Collected for Below Consumption from:

4. Tarlac Enterprises, Inc. (TEI) P 2,623,487.08

Total Penalties Billed and Collected P28,870,497.08
============

However, if the payments made under protest by the affected distribution utilities to
respondent NPC were passed on to the utilities customers, the reimbursements thereon
should also extend to the end-users.

In the event that the affected distribution utilities have actually refunded the same to
its customers, the said utilities are hereby directed to submit a report to the Board
showing that an actual refund was made to their customers or end-users.

The collection/imposition of penalty for consumption in excess of the allowable unit
and penalty for below consumption of the contracted demand/energy or unused energy
imposed by NPC shall likewise be not applicable to electric cooperatives and all other
NPC customers.

Finally, the Cease and Desist Order issued by the Board in its Order
dated December 20, 1995 is hereby made permanent.
[13]




The ERB denied reconsideration on January 12, 1999.
[14]
The NPC filed a Petition for Review
with the Court of Appeals on March 3, 1999.

Ruling of the Court of Appeals


The CA found no errors of fact or law that would warrant a reversal of the ERBs Decision. The
imposition of penalties by the NPC was tantamount to an increase in rates that required authorization by
the ERB, which was mandated to determine, fix and prescribe electric rates.
[15]
Since the latters approval
had not been sought, the charges were deemed void.

Hence, this Petition.
[16]


The Issues

Petitioner raises the following issues:

I. Whether or not the Energy Regulatory Board had jurisdiction over the subject
matter of imposition of penalties for contract violations.

II. Whether or not the imposition of the penalties is an increase in power rates that
requires authorization of the Energy Regulatory Board.

III. Whether or not the discounts provided in the Contract also requires the
authorization of the Energy Regulatory Board.

IV. Whether or not the issuance of the cease and desist order without the benefit of
notice and hearing is within the authority of the Energy Regulatory Board.
V. Whether or not a temporary restraining order/preliminary injunction should be
issued pending resolution of the petition for review.
[17]




The issues can be reduced to the following: 1) whether the ERB has jurisdiction over the subject
matter of this case; and 2) whether its Cease and Desist Order is justified.

The Courts Ruling


The Petition is unmeritorious.



First Issue:
J urisdiction Over the Controversy



Petitioner contends that the jurisdiction of the ERB to fix, set and determine rates does not
include the authority to overrule the imposition of penalties stipulated in the Contract of Sale and Delivery
of Power.
[18]

The NPC adds that only its rate-making authority was transferred to the ERB under Section 18 of
RA 7638. Petitioner, however, retained its power to promulgate rules and regulations governing its
operations in order to provide adequate, stable, reliable, and reasonably priced electric power.
[19]
In
conducting its day-to-day operations, it allegedly had to regulate the system loads of its transmission lines
by requiring its customers to have a contractual level and to maintain a maximum limit for the demand
and the energy consumption.
[20]


In effect, the NPC claims that the penalty clauses in their contracts with customers are policy
matters relating to the implementation of its corporate purpose, not to the fixing of rates.

Authority to Fix Rates

To complete this decision on the present controversy, the Court needs to trace briefly petitioners
rate-fixing authority.

Commonwealth Act No. 120
[21]
created the NPC and gave it the power to produce and sell electric
power and to fix the rates and provide for the collection of the charges for any service rendered.
[22]
The
rates were not subject to revision by the Public Service Commission,
[23]
which was then the government
entity that had jurisdiction over all public services.
[24]


Republic Act No. 6395
[25]
revised the charter of the NPC, whose power to fix the rates and fees was
retained, but became subject to review by the Public Service Commission.
[26]


Later, Republic Act No. 7638,
[27]
or the Department of Energy Act of 1992, recreated the
Department of Energy and reorganized the functions of some government agencies.
[28]
The power of the
NPC to determine and fix the rates being charged its customers was transferred to the ERB in this wise:

The power of the NPC to determine, fix and prescribe the rates being charged to
its customers under Section 4 of Republic Act No. 6395, as amended, x x x are hereby
transferred to the Energy Regulatory Board. x x x.
[29]




ERB J urisdiction

Executive Order No. 172
[30]
created the ERB to provide the policy guidelines and regulatory
framework for the activities and operations of the power sector.
[31]
The ERB was to regulate the business
of importing, exporting, re-exporting, shipping, transporting, processing, refining, marketing and
distributing energy resources.
[32]
Under Section 4 of the Executive Order, it was also tasked to assume
the functions of the Board of Energy
[33]
and of the Bureau of Energy Utilization.
[34]


Significantly, Republic Act No. 7638 transferred the ERBs non-price regulatory jurisdiction, powers and
functions to the Department of Energy.
[35]


Republic Act No. 9136,
[36]
the Electric Power Industry Reform Act of 2001 (EPIRA), transferred
the powers of the ERB to the Energy Regulatory Commission (ERC).
[37]


Rate and Rate-Fixing Defined

The crux of the controversy is whether the penalty charges imposed by the NPC are included in the
term rates. Unfortunately, the pertinent laws stated above do not define rates and what is involved
in rate-fixing. The Court, however, is not precluded from using other means to define these terms.

In the absence of legislative intent to the contrary, the general rule is that words and phrases are to
be given their plain, ordinary and common-usage meaning.
[38]
It is presumed that the lawmakers
employed the words in this sense.
[39]


Rate is defined as a charge, payment, or price fixed according to a ratio, scale, or standard;
[40]
or
an amount paid or charged for a good or service.
[41]


Rates are fixed on the basis of the investment amount or property value that the public utility is allowed
to earn -- an amount value otherwise called rate base.
[42]
Property valuation is dependent on the particular
circumstances and relevant facts affecting each utility.
[43]
After all, rate-fixing calls for a technical examination and
a specialized review of specific details primarily entrusted to the administrative or regulating authority -- in the
present case, the ERB.
[44]

There are many factors considered in ascertaining this value, such as the original cost of
construction; the amount expended in permanent improvements; the amount and market value of the
bonds and stock of the public utility; the present cost compared with the original cost of construction; the
probable earning capacity of the property under the particular rates prescribed; and the sum required to
meet operating expenses.
[45]
It must be noted that the government is not bound to apply any particular
method or formula for determining rates.
[46]


A just rate is founded on conditions that are fair and reasonable to both the public utility and the
public.
[47]
This stipulation means that the public utility must have, as profit, a fair return on the reasonable
value of the property.
[48]
The imposition of the maximum rates it charges cannot be confiscatory.
[49]
As to
the public, reasonableness requires entitlement to the service at an affordable cost.
[50]


Penalties as Rates

The penalties imposed by the NPC in its Rules on the Sale of Electricity are covered by the
definition of rate. Minimum Charges and Penalties for Consumption in Excess of Allowable Limit are
exacted from customers in relation to the sale of energy. These charges cannot be imposed without the
sale of energy. Indeed, a consideration in fixing rates is the purpose for which the penalties are
constituted: the regulation of the system loads of transmission lines,
[51]
so as to ensure the continuous
operation of the public utility or to cover part of its operating expenses.

The power to determine, fix and prescribe rates being charged customers is vested in the
ERB. Therefore, unless it gives prior approval, the penalties cannot be imposed by the NPC. Without
that authority, the challenged provisions in the Rules on the Sale of Electricity cannot be imposed on the
electric plant operators that PEPOA represents. While petitioner may issue rules and regulations
consistent with its corporate objectives, provisions that have a bearing on the impositions of rates must be
approved by the ERB.

In determining whether penalties are included in the term rates, this Court upholds the principle that
the authority of a board or commission is construed in the light of the purposes for which it was created;
and that whatever is incidentally necessary to a full implementation of the legislative intent should be
upheld as germane to the law.
[52]
Jurisdiction over penalties is necessarily part of the ERBs regulatory
functions; and is in line with the intent of achieving a coherent and effective policy formulation,
coordination, implementation and monitoring within the energy sector.
[53]


Discounts, Not Rates

Petitioner contends that if the penalties are subject to ERB approval, so too must be the discounts
in the latters Rules on the Sale of Electricity.
[54]
The discounts allegedly affect rates and benefit electric
plant operators, who must then reimburse the NPC accordingly.
[55]
We do not agree.

Indeed, petitioner correctly points out that because the
discounts affect rates, they should thus be a consideration in rate-fixing. They are, however, not amounts
paid or charged for the sale of electricity, but arereductions in rates.

Republic Act No. 7638 transferred the NPCs power to determine, fix and prescribe the rates being
charged customers. They are charged nothing, though, when they are given discounts. Evidently, the
ERBs approval of the discounts is not necessary.

Second Issue:
Provisional Relief


Petitioner further challenges the ERBs December 20, 1995 Order, which directed it to cease and
desist from collecting the penalties, pending resolution of the case.
[56]
The NPC contends that the
provisional relief required notice and hearing prior to being granted, similar to the requirement of the rule
on preliminary injunction under Rule 58
[57]
of the Rules of Court.
[58]
Petitioner adds that PEPOA did not
submit any supporting documents or affidavits to show the great or irreparable injury that would justify the
provisional relief.
[59]


Authority to Grant
Provisional Relief


The authority to grant provisional relief was conferred on the ERB, not under the Rules of Court but
under Executive Order 172, whose pertinent provision reads:

Section 8. Authority to Grant Provisional Relief. The Board may, upon the
filing of an application, petition or complaint or at any stage thereafter and without prior
hearing, on the basis of supporting papers duly verified or authenticated, grant
provisional relief on motion of a party in the case or on its own initiative, without prejudice
to a final decision after hearing, should the Board find that the pleadings, together with
such affidavits, documents and other evidence which may be submitted in support of the
motion, substantially support the provisional order: Provided, That the Board shall
immediately schedule and conduct a hearing thereon within thirty (30) days thereafter,
upon publication and notice to all affected parties.



This Court explained the cited provision in Citizens Alliance for Consumer Protection v. Energy
Regulatory Board,
[60]
as follows:

x x x [ERB] is authorized in appropriate cases to grant provisional relief, whether
on its own initiative or on motion of a party, either (1) upon filing of an application, petition
or complaint; or (2) at any state thereafter and without need of prior hearing, subject,
however, to conducting a hearing thereon within (30) days thereafter. Issuance of an
order granting such provisional relief must rest upon substantial evidence and is without
prejudice, however, to rendition of a final decision after hearing.
[61]




Plainly, the ERB has the authority to issue provisional relief 1) upon motion or on its own initiative;
2) without notice and hearing; and 3) after the filing of an application, a petition or a complaint.


Need to Substantiate
Provisional Relief

The ERB has the discretion to grant provisional relief. Section 8 of Executive Order No. 172 simply
requires that its exercise of this discretion be supported by substantial evidence
[62]
in the form of
authenticated or verified documents.
[63]
The reason can easily be discerned from the fact that the order
is, by its nature, temporary and subject to adjustment after final hearing.
[64]

The silence of the law cannot be construed as granting limitless discretion to the ERB. The
standard for granting provisional relief may be found in the laws creating or relating to the ERB. After all,
statutes should be construed as a whole and in relation to their amendments.
[65]
Thus, the ERB should
exercise its discretion in consideration of its mandate to ensure the quality, reliability, security and
affordability of the supply of electric power.
[66]
Provisional relief cannot be ordered in a whimsical,
arbitrary or oppressive manner.

If supported by substantial evidence, the factual finding of the ERB -- an administrative body
charged with a specific field of expertise -- is conclusive and should not be disturbed.
[67]
Administrative
bodies are given wide latitude in the evaluation of evidence, including the authority to take judicial notice
of facts within their special competence.
[68]
Absent any proof to the contrary, the presumption is that
official duty has been regularly performed.
[69]
Hence, the ERB is presumed to have performed its duty of
studying the available evidence, prior to the issuance of the provisional relief.
The ERB issued the Cease and Desist Order in recognition of the fact that end consumers would
ultimately pay for the penalties imposed by the NPC.
[70]
It is clear that the latter did not even rebut this
justification.

Factual issues may not be raised in a petition for review under Rule 45.
[71]
Even assuming that the
present case falls under the exceptions to this rule,
[72]
the Court is precluded from considering the allegation
that PEPOA did not submit any document or affidavit to support the latters prayer for a Cease and Desist
Order. Petitioner has made only bare allegations without referring at all to the evidence.

WHEREFORE, the Petition is DENIED and the assailed Decision and
Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.